Report: Evaluating the Cost-Effectiveness and Controversies of Orphan Drugs

The Orphan Drug Act (ODA) was enacted on January 4, 1983. It was designed to encourage the development of drugs for rare diseases. The law was amended the following year to define rare diseases as ones that affect fewer than 200,000 people in the U.S. But it also included drugs that affect more than 200,000 people the costs of developing and marketing the drug in the U.S. would exceed revenue from U.S. sales.

In terms of increasing the development of drugs for rare diseases, it’s clear the program has been successful. In a report published recently in the Orphanet Journal of Rare Diseases, it noted that almost 60 percent of new drug approvals in 2018 were for orphan drugs.

But the ODA has its controversies. A study published in late 2018by Trinity Partners, based in Waltham, Mass., ranked dozens of new drugs approved in 2015 by the U.S.Food and Drug Administration (FDA)based on therapeutic benefits, R&D costs, and commercial sales. The study found that orphan disease drugs generally haven’t done as well at launch and often continued to stumble after three years of sales.

That study also pointed out that the top 10 most expensive drugs approved from 2014 and 2016 were for orphan diseases. Examples include Alexion’s Soliris (eculizumab), which can run up to $500,000 per patient per year, and Vertex’s Kalydeco (ivacaftor), used to treat a subpopulation of cystic fibrosis patients, and can run more than $300,000 per patient per year.

Some critics argue the pharmaceutical industry has “gamed the system,” utilizing the ODA to maximize profits. Kaiser Health News reportedin January 2017 that, “the system intended to help desperate patients is being manipulated by drug makers to maximize profits and to protect niche markets for medicines already being taken by millions. The companies aren’t breaking the law, but they are using the Orphan Drug Act to their advantage in ways that its architects say they didn’t foresee or intend.”

Scott Gottlieb, the FDA’s Commissioner, indicated a year ago he was open to re-evaluating the ODA, telling Kaiser that it was time to ask: “Do we have the right incentives in place?”

However, the latest study, which was conducted by researchers from the University of Toronto and the University of Calgary, found that the clinical costs of orphan drugs were actually lower than the non-orphan drugs. “When focusing on NMEs [new molecular entities] alone,” the study stated, “we found that the capitalized clinical cost per approved orphan drug was half that of a non-orphan drug. We found that the out-of-pocket clinical costs per approved drug to be $166 million and $291 million (2013 USD) per non-orphan drug. The capitalized clinical costs per approved orphan drug and non-orphan drug were estimated to be $291 million and $412 million respectively.”

At least part of the new study was the recommendation that a more standard set of parameters be utilized to determine the value and costs of orphan drug development. The study noted, “Although these estimates themselves are highly dependent on the data parameters used in this analysis, our finding that orphan drug development is less than that of non-orphan drugs remain even with varied data parameters. Further research is required to better quantify the overall costs of drug development and obtain consensus on what cost categories should be included in such an analysis. Moreover, when considering value of drugs, more discussion is required before assessing whether recouping R&D costs should be a consideration when setting prices for drugs.”